Where do co-working spaces stand post-pandemic?
Co-working space is an office space from where more than one company is working from. The culture of co-working spaces first started to provide office space to start-up companies, who did not have much capital, and wanted more flexibility. It was more like real estate in a retail format. Post Covid-19 it will gain even more traction among enterprises, who want to adopt an asset-light model. Faster internet connections are allowing employees to work from anywhere.
Another reason why corporates are moving towards co-working spaces is that the work-from-home culture has decreased and people are slowly returning to work. These plug-n-play office spaces are helping businesses to adhere to social distancing norms. They primarily serve IT and allied companies.
As per a report by JLL Pulse-Monthly Real Estate Monitor, commercial real estate in India has seen a 40% jump in 2019, as compared to 2018. Backed by optimistic economic fundamentals, co-working spaces are one of the fastest growing businesses in this segment. 10% of office spaces are currently occupied by co-working spaces. From 1.1 million square feet in 2019, they have doubled to 3.4 million square feet in 2020.
Reasons for the rising demand for co-working spaces
The extremely high rentals in prime locations in major cities make it difficult for SMEs or start-ups to get a decent office space with modern amenities. Co-working spaces are in demand for the following reasons:
- There is a growing shift from traditional offices to more flexible spaces, especially among freelancers and start-ups. With remote work rising, business owners and entrepreneurs are joining co-working spaces to break out of their comfort zone of their homes, and to be more disciplined.
- Rising demand for co-working spaces in major cities especially among the software firms.
- The cost of leasing or the rents in prime locations are very high. These flexi-spaces cost less than normal office spaces enabling start-ups with a limited budget to operate from prime locations.
- They have a shorter lock-in period which benefits businesses. They can be vacated more easily.
- Co-working spaces foster collaboration, networking opportunities and sharing of ideas.
- They help to create a hybrid work model and a thriving community, so are popular among millennials. They offer a perfect blend of work, play and entertainment.
- They greatly benefit people who are working remotely from home and do not have the resources to convert their apartments into offices. Also, the atmosphere in many homes is not productive for work; isolation and loneliness being two other factors.
- Many companies don’t want to spend their capital on office interiors. For them, these co-working spaces are a boon.
Post Covid-19 Scenario
The Covid-19 pandemic has caused a huge shift in how companies operate across the globe. Cost saving is on everyone’s mind as companies struggle with an uncertain business environment. Today, everything that we want can be bought on a subscription based model-be it movies (Netflix), or software (SaaS). The same has been extended to the commercial real estate sector-a prime example being co-working spaces.
Some Features of co-working spaces
- Leases are for short terms.
- Number of tenants is small.
- They are mostly used by freelancers, start-ups or small companies.
How to start a co-working space business in India?
A co-working space business involves renting out shared office space to individuals or companies.
You can start it by taking the following steps:
1. Plan your business
A clear plan is essential for starting your business. First of all, you have to find out the costs involved. The primary costs are for leasing a commercial space and purchasing the following:
- Networking equipment and Wi-Fi connections.
- Furniture, interior decoration and miscellaneous items like dustbins, coffee vending machine, etc.
Location is the most critical part. The best option is to find a space in the heart of the city in prime commercial areas. Or, if you want to have one at a cheaper rate you can look for in the suburbs. But it should be close to public transport so that the commute is easy.
If you already have a property, you can start the co-working space as soon as you do the furnishings. If you don’t have one, you will have to rent one. Try to be near the ecosystem of your target market.
3. Business Model
The co-working space revenue streams are rent collected and payments for services from the clients. Usually how the model works out for co-working spaces is that if you pay X amount of rent for one, you will lease it to others for 3X the amount. The monthly price can include printing, utilities, etc.
You can maximise your recurring revenue if you can find occupants 24x7, maybe in 3 shifts. Some other revenue channels apart from membership fees could be:
- Approach companies that allow their employees to work from home for a certain period in a month. Offer them discounted packages.
- Organise events that may be of value to your customers, and charge them a fee.
- Conference rooms take up a large share of your co-working space, and you can monetise it by renting it by the hour to the public.
4. Marketing and Advertising
The first step in your co-working space marketing plan should be to identify your niche and in what ways are you different from your competitors. The next step will be to communicate them to your target audience which might be the local businesses and entrepreneurs. You have to create a professional website.
A website is a part of your brand and will help potential members learn more about you, and the kind of services you offer. Also, advertising on the newspapers or promoting on social media can help spread the word around.
Once your co-working space is operational, you have to do the following to stay ahead of the game:
- Provide flexibility to tenants. If any business wants to downsize, be prepared to re-negotiate the contracts.
- Provide out-of-the box ideas and solutions. Communal space must cater to both the worker’s emotional lives, as well as increase productivity. Also, it must provide some luxury compared to normal offices.
- You can invite successful entrepreneurs or start-up founders to come and give lectures. It will create opportunities for networking.
A co-working space usually provides the following facilities for businesses:
- A variety of working spaces including fully furnished offices with bright and spacious private rooms.
- Multiple board-room style meeting rooms
- Fast and reliable wi-fi.
- A recording booth, microphones, presentation technology, multi-screen television, video cameras, etc.
- The option of renting lockers, mailboxes and storage areas.
- Print and scan facilities.
- A cafeteria.
How are co-working spaces impacting commercial real estate?
Co-working spaces had first come up in response to the need of freelancers, but now it is part of the real estate business ecosystem comprising landlords, companies, and of course tenants. Commercial real estate in India is seeing the effect of co-working spaces. Many closed factories or abandoned warehouses sitting on prime tracts of land in cities like Mumbai or Pune are being turned into co-working spaces.
Earlier landlords were wary of leasing out spaces to these operators due to lack of knowledge about their business model. They did not want any changes in the premises also.
What is the future of co-working space in India?
Flexible office spaces are going to be a very viable alternative for businesses once the pandemic is over, and the situation normalises. Cutting costs will be the number one priority for any company. If any company wants to expand, co-working spaces will help them to avoid large capital expenditure. Not only are co-working spaces favoured by small companies, nowadays they are also in the radar of big corporations. All these factors will accelerate its adoption rate in the coming months.
Any operator in the co-working business would do well to target large enterprises for selling office space, since the demand from freelancers or start-ups would be less in the short term. Many current players are expanding by opening new centres across the major cities, and will be fostering the spirit of enterprise across the nation. Big enterprises are also setting up incubation centres within these shared spaces.
Large businesses are rethinking their real estate strategies after the pandemic, and seeking a balance between work-from-home and attending offices. So, co-working spaces act as a sort of stopover for these uncertain companies. A trend that we foresee in the coming months is a ‘hub-and-spoke’ model being adopted by companies. They will have a ‘hub’ at a primary city centre, and ‘spokes’ at various other locations. Co-working spaces can act as the ‘spokes’ depending on the employee strength of the company.
The co-working space business is definitely the hottest thing in commercial real estate right now. So, it is profitable for an entrepreneur to take advantage of this bullish trend, and enter the business.
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